"Last August I asked the noble Lord, Lord Levene, to undertake a fundamental review of the way in which the MoD is structured and managed. Today, I am publishing the independent report led by him. Copies of the report will be placed in the Library of the House. I would like to thank him and all members of his steering group both for this excellent report and for setting us all an example by delivering it early. The group chaired by the noble Lord, Lord Levene, has recommended a radical new approach to the management of defence and I am pleased to say that I agree with it, as do my ministerial colleagues, all the Chiefs of Staff and my Permanent Secretary. We have already taken some of these forward.

No one in this Government was under any illusions about the scale of the challenge we inherited in defence. The report by the noble Lord, Lord Levene, confirms this. We have already introduced changes to budgetary control, reform of procurement, export promotion, SME development and change to our Armed Forces. The SDSR sets a clear direction for policy and will deliver coherent, efficient and cutting-edge Armed Forces fit for the challenges of the future. As a result, Britain will remain in the premier league of military powers. But the vision of SDSR cannot be achieved without tackling the drivers of structural financial instability and the institutional lack of accountability in the way that defence is managed. The report by the noble Lord, Lord Levene, provides the blueprint for the necessary transformation.

Before setting out his recommendations in more detail let me first acknowledge the great strength that resides within our people. They are professional, committed and often frustrated by a system that all too frequently lets them down. Among other things, the report describes a department bedevilled by weak decision-making and poor accountability, where there is insufficient focus on affordability and proper financial management.

The steering group of the noble Lord, Lord Levene, proposes a new, simpler and more cost-effective model for departmental management-with clear allocation of responsibility, authority and accountability-that builds on the strengths of the individual services, and does so within a single defence framework that ensures the whole is more than the sum of its parts. It is underpinned by a number of core themes.

First, to date, individuals in defence have been asked to deliver defence outputs, but not given the means with which to do so effectively and efficiently. Authority must be aligned with responsibility. Budget holders should have the levers they need to deliver. They should then be held robustly to account. In the past, the decisions that should have been made centrally have been ducked, and head office and Ministers have delved into tactical. The Defence Reform Unit recommends a strengthened decision-making framework for defence, centred on a new, leaner defence board, based around the Defence Secretary, who chairs and makes the decisions, supported by the Permanent Secretary and the Chief of the Defence Staff, who will bring to the meeting the views of the single service chiefs. I have already established this new board and chaired the first meeting last week. This new group will offer the kind of decisive and focused strategic direction that has been so lacking in recent years.

Secondly, financial management must be tightened, and a risk-aware and cost-conscious mentality must permeate every level of the MoD. The review recommends a new planning and financial model. Within that framework, we will empower the chiefs to run their individual service. Our single service chiefs are the custodians of their services-the fundamental building blocks of defence. Sadly, they are currently forced to devote far too much of their time trying to influence policy and haggle over funding in London. This is a pointless waste of time and talent.

In the new model, the service chiefs will get clearer direction from the defence board, will do the detailed military capability planning across equipment, manpower and training, and propose how best to deliver that strategic direction. Once that is agreed, they will then be given greater freedom to veer and haul between priorities within their own service to deliver what is needed by defence, and they will be held robustly to account for doing so. Allowing the chiefs to spend more time with their service reduces the requirement for commander-in-chief appointments and these will be phased out as part of a general reduction in senior posts. We will work closely with the Treasury on how to deliver this major change, but I am confident that when properly supported, trained and directed, it is our people at the point of delivery who are best placed to run their business, and not those at the centre.

Thirdly, the service chiefs have an established role as advocates for their service, but powerful single-service advocacy can sometimes be at the cost of joint or cross-cutting capability.

The report has recommended that we create a new joint forces command. It will also manage and deliver specific joint enabling capabilities and set the framework for other joint enablers within the single services. It would include the Permanent Joint Headquarters and be led by a new 4-star commander. Joint forces command will therefore be an important organisation in its own right, but it is also has symbolic purpose reflecting our view of how conflict will develop and providing a natural home for some of the capabilities of the future, such as cyber, as well as reinforcing joint thinking, joint behaviours and the new joint generation of officers within defence. It offers a new opportunity for career progression right to the top and a challenging and intellectual career for those who otherwise may not have been attracted to defence. It may also be a way for service personnel who are injured on operations and unable to serve on the front line but are still determined to serve their country.

Fourthly, the report rightly challenges us to consider whether we maximise that talent across defence. Be it in promotion, the development of key skills or helping our people choose the right career path, more can and should be done. The report has concluded that we must pursue more vigorously the principle that posts be filled by the right person with the right skills for the right length of time. Buggins's turn must not interfere with the promotion of the right person for the job, nor can we have the musical chairs of the past. The noble Lord, Lord Levene, has therefore recommended that we move to a system where most senior civilian and military individuals stay in post for longer than at present; as a rule for up to five years. This will allow our people to establish themselves in their roles and invest the time they need to make a real difference to defence and be held to account for their performance.

To ensure that we maximise delivery at the front line, the noble Lord, Lord Levene, has recommended that we review all non-front-line posts across defence, beginning at senior and management levels, including an assessment of the most cost-effective balance of regular military, reservists, civil servants and contractors. We are top-heavy and that must end. Most significantly, he recommends that we adopt a new, more joint model for the management of senior military personnel in order to make promotion and appointment processes more transparent and standardised and to encourage the development of officers with strong joint credentials.

The report by the noble Lord, Lord Levene, covers far more than I have been able to address here. It is a thorough and compelling analysis that repays close examination. I am confident that when the people within defence review the recommendations they will recognise this work not as a criticism, but as a constructive critique of a department in need of reform and that they will relish the challenges that it presents".

My Lords, I thank the Minister for repeating the Statement made in the other place by the Secretary of State. I have not yet had time to read as carefully as I would wish the report that has been presented on the structure and management of the Ministry of Defence, but we add our thanks to the noble Lord, Lord Levene, and his colleagues for the work they have undertaken. Support for our Armed Forces is vital and acknowledged by us all. They protect our national security and the security of others, and are prepared to put their lives on the line to do so. An effective and efficient Ministry of Defence is a key element of that support.

The Statement addresses reform. Based on the details in the Statement, we welcome the widening of the pool of promotion, making service chiefs more accountable for spending and, in principle, some of the changes in Ministry of Defence structure. We agree with measures to streamline the higher levels of the military.

Clearly, we will need to examine the detail but, from what we know so far, we support the introduction of a joint forces command. There are arguments in favour of the new Defence Board in minimising interservice rivalry. Are the Government of the view that the strategic defence and security review was adversely affected by interservice rivalry and differing interservice objectives?

Some will note that this proposed change involving just the Chief of Defence Staff being on the board, not the three service chiefs, comes just after the Prime Minister was quoted as saying last week, "I'll do the talking, you do the fighting", and wonder whether the Prime Minister's view is now being confirmed in the future structure of the Ministry of Defence.

The report, as we understand it, is not primarily about finding ways to save money or an exercise in how to improve the procurement function; it is a report about the management and structure of the Ministry of Defence. Bearing that in mind, it would be helpful if the Minister could give examples of what recent decision-making processes or activities would have been improved or been more effective had the new structure now proposed been in place, and why. Would it, for example, have led to a better strategic defence and security review, devoid of rushed decisions? Would the new structure have avoided what appears to be a considerable black hole between the declared intent of the strategic defence and security review and the amount of money available to deliver it, as the Government seek efficiency savings that they have not found and are engaged in events that they did not forecast?

How long is it anticipated that it will take to implement the new structure and management arrangements in full? Bearing in mind that we are currently fighting two wars, how will the Government ensure that the attention of those senior personnel involved is not deflected, to the detriment of the actions in which we are engaged, by having to implement a reorganisation?

The change in structure would appear to have an impact on the workload of the Chief of the Defence Staff, as the occupant of that post will be required in future to keep closely in touch with the service chiefs, who will not, as we understand it, be based at the Ministry of Defence. The Chief of the Defence Staff will be responsible for co-ordinating, determining and putting across the views and position of the Armed Forces at the new Defence Board. Is the Minister satisfied that one person can effectively undertake that role, and what level of support staff will the occupant of the post require?

The change in structure indicates a more hands-on role for the Secretary of State for Defence and other Defence Ministers, as the Secretary of State will be chairing the new Defence Board, which will presumably be meeting not infrequently. Does that mean that as a result, any functions currently undertaken by defence Ministers-in particular, the Secretary of State-will no longer be undertaken by them?

The report indicates that increased length of time in office by the most senior personnel would help. It would presumably assist in ensuring consistency of decision-making, as well as greater depth of knowledge of at least recent past events and the reasons for the approaches and decisions adopted and commitments made. It would also mean that some of those responsible for decisions were more likely to have to see them through to fruition and completion. Do the Government intend to act to ensure greater length of tenure in office for senior personnel, including defence Ministers?

The new Defence Board, chaired by the Secretary of State, will apparently be responsible for strategy. Will it also be responsible for ensuring that resources, including financial resources, will be provided over the whole timeframe for the strategy that has been determined? Does that mean that if the money is not there to deliver the agreed strategy, the responsibility rests with politicians, and the Secretary of State in particular, who will be chairing the board?

Do the Government see the changes set out to the structure and management of the Ministry of Defence as increasing or decreasing the involvement of Ministers in defence decisions and strategy? Do they see the changes as increasing or decreasing the involvement of service chiefs in those decisions? Could the Minister also say who, under the new structure, will assess future threats and scenarios? Will it be the Ministry of Defence at, say, the Defence Board, or will it be the National Security Council? We should bear it in mind that last week the Prime Minister referred to the current role of the National Security Council's weekly sitting, asking whether we have the right resources and the right strategy. Have the Government, as part of their consideration of the report of the noble Lord, Lord Levene, considered the relationship between the restructured Ministry of Defence and other government departments and bodies whose decisions can impact on defence policy?

The Minister will accept that no change in structure, roles or responsibilities can achieve anything in itself. At the end of the day, any structure is dependent on the people who have to make it function. Only time will tell if the changes being made in the Ministry of Defence will deliver the objectives the Government have set in the light of the Levene report.

My Lords, I am conscious that the noble Lord fired lots of questions at me. I was not able to keep up with all of them-I do not write quickly enough-but I will write to him about the questions that I am unable to answer here, and I will put a letter in the Library.

The noble Lord started by pointing out he had not had a chance to read this document properly, and I am conscious there is a lot to absorb. If there is interest from noble Lords, I am happy to organise a briefing in two or three weeks' time. The noble Lord, Lord Levene, has undertaken to answer any questions from noble Lords, which I think would be helpful.

The noble Lord pointed out that historically there has been inter-service rivalry. In any large organisation, there will be some friction between different parts of the business, not least over resources. This is exacerbated in difficult financial times, which we are going through at the moment. However, the services have a long and successful record of operation alongside each other on operations and elsewhere-a number of the noble and gallant Lords in the House are witness to that. The proposed model seeks to harness their respective strengths even more effectively.

The noble Lord then asked when the recommendations will be implemented. Work will begin immediately and will proceed at pace. Implementation will be overseen through the defence transformation programme. Some of the recommendations are already being implemented, in particular the introduction of the new infrastructure and corporate services models and the creation of the new smaller Defence Board. However, some of the proposals, such as the introduction of the new model for capability planning and financial management, clearly need to be planned in detail and have key enablers in place.

The noble Lord-I hope I heard him rightly-said that the chiefs will be leaving London. That is not the case; we are not taking the chiefs out of London. We see their primary focus as leading and running their service. The focus of their time and effort will therefore be on their command. However, the report is clear that they have a continuing role within the head office, in particular through the Chiefs of Staff Committee, and will need to maintain office space and a smaller support staff in London. Following the fundamental principle of delegation of responsibility, the chiefs will have to decide for themselves how best to manage their time and location.

The noble Lord asked me whether they are getting less power. They are not being sidelined or downgraded; they remain custodians of and advocates for their service. They are being given increased delegation and empowerment to develop and generate their services to provide the forces' defence needs within the agreed budget. Under the new model they will continue to play an important role in advising on the employment of their service and on the wider management of defence, but their focus will be on the delivery of their service.

The noble Lord asked whether the responsibilities of Ministers are increasing. The answer is definitely yes. The Secretary of State will chair the Defence Board, and there will always be another Minister on it, which was not the case in the past. It has not been decided who that Minister will be-whether it will be the MinAF or a rotation of Ministers-but he will get more responsibility. The National Security Council clearly has overall responsibility, as the noble Lord pointed out, and I confirm that the Secretary of State and the Chief of Defence Staff attend. When the Secretary of State is unable to do so, the duty Minister goes to the National Security Council meetings.

I hope that I have answered most of the questions but, as I say, if I have been unable to answer them all I will certainly write to the noble Lord.

My Lords, I very much welcome this report, which has been a long time coming. Parallel to the restructuring that is talked about in the report, should we not also look at the financial aspects, particularly the relationship between the Treasury and the MoD? When one is talking about programmes of the length that run in the MoD, there should be some certainty of finance. Should we not move towards a situation in which ideally there is some cross-party agreement on the percentage of GDP spent on defence? Should not the Treasury give some sort of 10-year commitment to funding so that this report can be sensibly implemented parallel to the procurement process?

My Lords, my noble friend raises an interesting point about the Treasury agreeing to 10-year funding and cross-party agreement on it. This question is very much above my pay grade and I will let my noble friend know. Clearly a lot of the financing of defence was looked at in the SDSR, and it is vital that the points made by the noble Lord, Lord Levene, and the reforms that we bring in are properly funded.

My Lords, I thank the noble Lord for repeating the Statement. Can I focus on the responsibilities that a single service Chief of Staff will have for the funds allocated to him? The Statement talks about his ability to "veer and haul" within that funding. Will all that veering and hauling have to be put to the Treasury bit by bit, or will the Chief of Staff have freedom of manoeuvre, without which he will have no advantage whatever?

The noble and gallant Lord makes a very important point. I am very much in listening mode today, but it is my understanding that initially the Treasury is sympathetic and that the chiefs will have a great deal of power on their budget.

My Lords, I certainly welcome the Statement, and anything that improves the operational efficiency of the department is to be most welcomed. I well remember when I was a Minister in the department discovering by chance that I had not seen a report meant for my attention. When I asked my officials about it, they were surprised that I knew of it and I subsequently discovered that the Army, Navy, Air Force and the Civil Service were all looking at the report separately rather than collectively, and were going to make separate submissions to me. I thought that that was somewhat inefficient but it was the norm rather than the exception.

What precise steps will the Government put in hand to ensure that the implementation and outcomes of the recommendation of the noble Lord, Lord Levene, are closely monitored? Without monitoring implementation outcomes, the efficiencies that are being sought will simply not be achieved.

My Lords, the noble Lord makes an important point about the monitoring of implementation. I have quite a lot of briefing on that with which I will not tire the House, but I assure him that we will take that very seriously. We want it to succeed; we will monitor it and watch it very closely.

The report on defence reform by the noble Lord, Lord Levene, is yet another chapter in the steady evolutionary process of the higher organisation of defence going back some 47 years to the Mountbatten reorganisation, in which I had some direct involvement. I even recognise some of the same cries and aspirations.

I want to ask two questions, but before I do, having had a chance to read the report and based on consideration experience I must say that I consider it to be a well considered, logical, sensible and helpful report that will give very good guidance for the future, although whether it will achieve the aim, to which I heartily subscribe, of making the Ministry of Defence a smaller action headquarters capable of delivering effectively, economically and on time what is required to support and sustain the national strategy that has been agreed by the National Security Council will, as has already been said, depend on the attitudes and actions, to say nothing of the calibre, of those who have to implement the reform.

My first question is: does the Minister agree that if the CDS alone is to represent the overall military view at the Defence Board with sufficient strength, substance, urgency and authority to ensure that operational policy and what is practicable and realistic in combat do not get out of step, he requires the manifest support and ready advice of the heads of those services who have the responsibility of carrying out that policy? The Chiefs of Staff in committee with, where necessary, direct access to the Secretary of State and, indeed, to the Prime Minister during operations still have an important part to play. Otherwise, the operational and military requirements that may make all the difference between success and failure, if we have to deploy forces, may not get taken care of quite as enthusiastically as the political and financial ones, which have wide and urgent representation. Some reassurance on that point would be welcome.

Secondly, although the head of each service is still called a chief of staff, because he is responsible to the Secretary of State and has now gratifyingly been given more power and flexibility to run his own service, will we not be asking too much of one man if he is to be expected to combine his overall policy functions in that respect with the day-to-day geographically extensive command and administrative responsibilities of a commander-in-chief?

I think the Minister has got the message and has the answers for the noble and gallant Lord. We have to give other noble Lords the opportunity to come in in the remaining 14 minutes. It is only fair to other noble Lords.

My Lords, I am very grateful to the noble and gallant Lord for his support. I agree with him that it is an excellent report, and I pay tribute to the noble Lord, Lord Levene, my noble friend Lady Noakes and the rest of the team who did this excellent work.

The noble and gallant Lord asked whether I agree that the CDS alone represents the overall military view at the board. While the CDS will be the sole military representative on the new Defence Board, the advice of the single service chiefs will continue to inform the successful decision-making of the department. Their prime role will be running their services, but the Joint Chiefs of Staff Committee will sit in a new Armed Forces mode to allow the CDS to draw on the environmental advice of the chiefs in formulating his advice to the Defence Board. The CDS should not be constrained by that advice, but this forum will ensure that there is a clear mechanism for the views and advice of the chiefs to be articulated. The Chiefs of Staff operations committee will continue as now so that the single service chiefs' advice is still heard on operation issues.

The noble and gallant Lord asked whether the CDS having more power would be too much to ask of one man. In the new model, the role of the CDS will be clarified and strengthened. However, in making the recommendations, the steering group has been mindful of the need for a balanced model in which the CDS and the PUS would continue to jointly lead defence and ensure that the CDS is not overloaded. His prime function will continue to be as the principal military adviser to the Defence Board, Ministers and wider government, and as the strategic commander of operations. It was because of the heavy loading on the CDS post that the steering group recommended continuing with a deputy for him, the Vice Chief of the Defence Staff, even though some of the VCDS's responsibilities are being transferred to the joint forces command.

My Lords, I also thank my noble friend the Minister very much for repeating the Statement. I will not delay the House as long as I intended because the noble and gallant Lord, Lord Bramall, put the points that I was going to put far more eloquently and with far more experience than I-although it is a pity that the House was prevented from hearing the conclusion of his remarks.

I have one or two further questions for my noble friend the Minister. First, I am not quite sure about the joint forces command. Is this an additional command similar to land, air and fleet? Where will it be located and what kind of operations will it undertake? Secondly, I entirely agree with the noble and gallant Lord about the Defence Board. At present, the balance on the Defence Board is seven civil servants to five military personnel-the chiefs and the Vice Chief of the Defence Staff-and it will be seven to one. That is an extraordinary change in balance. Like the noble and gallant Lords and other noble Lords who have spoken, I wonder whether the Chief of the Defence Staff really can represent the interests of all three services, let alone the interests of the three services in relation to the civil servants.

Thirdly, on the role of the Defence Council, I understand that in law it is not the Defence Board but the Defence Council in which the statutory authority to control defence is vested. I understand that there is no intention to remove the Chiefs of Staff from their place on that.

My Lords, I thank the noble Lord, Lord Campbell-Savours. He is trying to remind us that there is a House full of people wishing to start the next debate. I know that the noble and gallant Lord and others see this change in organisation at the Ministry of Defence as also highly important, but I remind the House that during Statements,

"although brief comments and questions from all quarters of the House are allowed, statements should not be made the occasion for immediate debate".

I agree with the noble Lord, Lord Campbell-Savours that questions and comments should be brief.

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Briefly, my final question is whether the Minister thinks that the fact that the chiefs will spend more time with their services, and presumably in cars going to visit each other, and less time in offices next door to each other will lead to more "jointery" rather than less.

My Lords, I thank my noble friend for his questions. On the first, the joint forces command is an additional command and will have a new four-star commander. We have not yet decided, but it will probably be located at PJHQ, which is relatively accessible to the head office. However, we are still working on that. As to how the JFC will fit into the defence structure, PJHQ will sit within the JFC but the Chief of Joint Operations will continue to report direct to the Chief of the Defence Staff on the conduct of current operations.

As to whether chiefs driving around will lose of control of their services, I do not think they will. We believe that it will strengthen their position if they spend more time with their services. They will obviously be able to come to London from time to time, but we feel that they will probably want to spend much more time with their own services.

The Minister will be aware that there are 19 grace and favour residences and that lavish expenses are provided to senior officers in all three services, which sits ill in the budget when people in the front line are being asked to make cutbacks. Has the noble Lord, Lord Levene, made any recommendations in relation to this and, if so, what is the Government's response?

My Lords, I am not aware that the noble Lord, Lord Levene, has made any comment about, as the noble Lord says, lavish residences. I have been to some of the lavish residences the noble Lord mentions and I can confirm that the chiefs use them in an important way for defence, particularly for defence diplomacy, which is a very important part of our objective at the moment.

My Lords, within the single service boards and the Defence Council, the single service chiefs are currently responsible directly to the Secretary of State for the efficiency, morale and fighting effectiveness of their services. Can the Minister confirm that this constitutional arrangement will be unaltered by what is proposed?

My Lords, will the restructuring of the MoD deal with what I regard as a very serious problem-namely, that when major contracts are let for equipment, ships or whatever, invariably there are changes as they go along, and it seems that the contractors can then charge whatever they like for the alterations?

My Lords, my noble friend makes an important point. We now have a CDM who I confidently expect to get on top of all our procurement issues and, in doing so, save the defence budget a great deal of money.

My Lords, much has been made about the greater flexibility that the Chiefs of Staff will have as a result of having more money and resources to play with. As things stand at the moment, most of that money is tied up in salaries and fixed costs that do not have much flexibility-probably 5 or 10 per cent of their budget. Can the Minister indicate how much more money they are to be given to play with for equipment and how that will be managed when, for example, a significant amount of equipment is used across all three services? How will that be arbitrated?

I am grateful to the noble and gallant Lord for that question. It is too early to give a specific figure. We received the report of the noble Lord, Lord Levene, today and we are considering it. We have not come up with any figures on that issue.

My Lords, is the Minister implying that the three single service headquarters-land, air and naval-are being removed and replaced by this joint forces command, or are they going to stay? If so, what will be the relationship between them?

My Lords, the joint forces command is a new command with a four-star commander. We are not forcing the chiefs out of London; they can still have a base there. We expect them to continue to keep a base in London, with a smaller staff, but to spend more of their time with their own services.

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